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Businesses The Almighty Buck News

Some of the World's Biggest Economies Are on the Brink of Recession (cnn.com) 280

Markets closed out last week on an anxious note. It's not difficult to see why: the coronavirus continues to spread, and there are signs that some of the world's top economies could slide into recession as the outbreak compounds pre-existing weaknesses. From a report: Take Japan: The world's third-largest economy shrank 1.6% in the fourth quarter of 2019 as the country absorbed the effects of a sales tax hike and a powerful typhoon. It was biggest contraction compared to the previous quarter since 2014. Then there's Germany. The biggest economy in Europe ground to a halt right before the coronavirus outbreak set in, dragged down by the country's struggling factories. The closely-watched ZEW Indicator of Economic Sentiment in Germany decreased sharply for February, reflecting fears that the virus could hit world trade.

Bank of America economist Ethan Harris points to the number of smaller economies that are hurting, too. Hong Kong is in recession and Singapore could soon suffer a similar fate. Fourth quarter GDP data from Indonesia hit a three-year low, while Malaysia had its worst reading in a decade, he noted to clients on Friday. Meanwhile, engines of growth like China and India slowed in 2019. Fourth quarter GDP data for the latter comes out this week. All of this brings to the fore concerns about the global economy's ability to withstand a shock from the coronavirus. Harris says the weak quarter was likely a result of lingering damage from the trade war between China and the United States. The coronavirus is poised to make matters worse.

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Some of the World's Biggest Economies Are on the Brink of Recession

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  • the myth of growth (Score:2, Insightful)

    by Tom ( 822 )

    Meanwhile, students of the Chicago School and other borderline criminal groups of economists with an agenda continue to believe that growth is the only important thing about an economy, not things like, say, the ability to supply its population with necessities, maintain its infrastructure and provide medical and educational services.

    There was a time before the neo-liberal movement that caused a planned and intentional shift in culture and thinking when stock prices only mattered to stock brokers and the su

    • by 110010001000 ( 697113 ) on Monday February 24, 2020 @12:03PM (#59761208) Homepage Journal

      I'll never understand the idiots who say modern economies that don't "actually produce anything of value". I mean, look out your window. Westerners are totally spoiled.

      • by radl33t ( 900691 )
        I see a lot of dilapidated infrastructure, especially compared to my recent trips out East
      • Re: (Score:2, Insightful)

        by Anonymous Coward

        The US has 3 car manufacturers and one airplane manufacturer. Everything else of value to everyday consumers is made elsewhere now. Shoes, clothing, appliances, etc...it's all been sent overseas. The virus outbreak is a pretty big reminder that China is the source of almost all goods.

    • Re: (Score:3, Insightful)

      Meanwhile, students of the Chicago School and other borderline criminal groups of economists with an agenda continue to believe that growth is the only important thing about an economy, not things like, say, the ability to supply its population with necessities, maintain its infrastructure and provide medical and educational services.

      Completely agreed. Working in manufacturing, I'm seeing first hand what challenges we face in the coming months/years. Necessities, infrastructure, health, and education is what we need to focus on.

      • by Way Smarter Than You ( 6157664 ) on Monday February 24, 2020 @12:59PM (#59761528)
        We've never had it better under any other system when it comes to necessities, health, education, and so on. Going to college is the default state for most kids. Food is so plentiful we throw it out. No more "fish in Fridays" because we couldn't afford meat every day. No more polio or a bunch of other horrible shit. Dental care is fucking amazing compared to only 30 years ago. Most people survive heart attacks. Cancer has higher survival rates than ever. People live longer and healthier than ever. When was this magic time and place things were better by any metric? Any metric at all? You live in a grand golden era the likes of which no human has ever before experienced.
        • Re: (Score:3, Informative)

          by Altus ( 1034 )

          Going to college, racking up huge debt and then having that drown you for much of your adult life while getting jobs that don't pay nearly as well as non degree requiring jobs did 50+ years ago.

          It was definitely better when you could buy a house in your early 20s based on earnings from a factory job that didn't require a degree, or getting a degree for little money and then having it pay off for you in a nice payday when you get out of school.

          Things are good for some people these days, but its not nearly as

    • Oh for fuck's sake, stock market collapses have always been catastrophic, leading to credit market lock ups, losses of fortunes and misery for the underclasses. Again, I reiterate, the profound ignorance of history and economics around here, and in many other circles, truly makes me despair. Human beings, despite having one of the most wondrous objects in the observable universe sitting between their ears, are so capable of utter stupidity.

      • by mssymrvn ( 15684 )

        "despite having one of the most wondrous objects in the observable universe sitting between their ears"

        Business majors and MBAs excepted.

        • No, just about everyone excepted. Humans are still fundamentally great apes even at the neurological level. We're utterly incapable of assessing anything but the most proximal risk. We're psychologically incapable of planning for the future, for assessing and acting on long-term risks, or moving towards long-term benefit. We marry ourselves to ideologies, whether religious, political or economic, and then drive that bus right over the cliff because we are inflexible. Now and then, there's a marriage between

          • by radl33t ( 900691 )
            This may be true as the current state of the species, but doesn't fairly describe our potential. We can overcome these limitations by training and conditioning, aka programming ourselves. Our minds are very flexible and we don't have to use them how the jungle intended.
        • by syn3rg ( 530741 )
          I propose we build three rockets to save the Earth's population...
      • by jiriw ( 444695 ) on Monday February 24, 2020 @12:53PM (#59761502) Homepage

        Although stock market collapses have often been quite catastrophic (including an event that could be considered the first one - the Dutch tulip bubble), there WAS another decent capitalist economic model instead of the Chicago school's Anglo-Saxon model.
        It treated workers and consumers much more fairly and saw them as equal partners to investors in shaping business. It worked quite well, for a period in the 20th century but wasn't to the liking of a certain economic and political power that under the misnomer of 'free trade' tried to break that all down when it started to really 'leverage' the goodwill it had gained in overthrowing another extremist kind of regime which wreaked havoc only decades earlier.
        In came the hedge funds and private equity and everything that was worth slightly more than share-holders thought they had invested in, was cut up, broken down and received credit for. All in a bid for the mighty buck. We're now at a point that most companies only work for the share-holders and try to placate the other parties by being slightly less than equally bad than their competitors. Instead of livable wages and quality products we have blue collar workers working three jobs at once to keep out of debt and junk that falls apart whenever you look askance to it. That is... unless you live in a country where government at least regulates the worst of it. And guess which population of which country historically has been the most fervent proponent of small government and in which country that population is hit (dis)appropriately hard because of it?

    • We need to kill off or at least penalize rent seeking behavior endemic to the financial industry and found in monopolistic businesses.

      Stop rent seeking and start making real stuff.

    • by Solandri ( 704621 ) on Monday February 24, 2020 @12:24PM (#59761318)

      students of the Chicago School and other borderline criminal groups of economists with an agenda continue to believe that growth is the only important thing about an economy, not things like, say, the ability to supply its population with necessities, maintain its infrastructure and provide medical and educational services.

      That is what growth is. Increase in productivity per person, meaning on average each person produces more, so on average each person can create more infrastructure, and consume more necessities, medical care, and educational services.

      Productivity and consumption are conserved - everything you consume must first be produced. For you to eat something, someone must first put in the work to produce, harvest, and deliver it to you. For you to receive medical care, someone must first put in the work to create medicines and provide care. For you to receive education, someone must put in the work to teach. If you wish to consume more (i.e. increase your standard of living), then it must be coupled with economic growth (increased productivity). The people producing these things have to produce more of it per year, before you can consume more per year. And likewise you produce more of whatever it is you make per year, so that others can consume more of it. In other words, economic growth == increase in standard of living; and it is impossible for the standard of living to increase without economic growth.

      You can argue that the fruits of the productivity are being unfairly distributed, but that's separate from growth. Arguing that economic growth is unimportant, or worse, arguing that economic contraction isn't harmful, is just stupid and will result in decreasing the standard of living. e.g. Raising the minimum wage doesn't automatically create more productivity. It only does that if wage inequality is so skewed that the disproportionate fraction of business revenue being taken by the wealthy is causing economic inefficiencies in itself (i.e. is hurting growth). If you raise the minimum wage when that's not the case, it will actually hurt growth, and thus lower productivity and decrease the real purchasing power of the very people you're trying to help.

      • by 0dugo0 ( 735093 )

        students of the Chicago School and other borderline criminal groups of economists with an agenda continue to believe that growth is the only important thing about an economy, not things like, say, the ability to supply its population with necessities, maintain its infrastructure and provide medical and educational services.

        That is what growth is. Increase in productivity per person, meaning on average each person produces more, so on average each person can create more infrastructure, and consume more necessities, medical care, and educational services.

        Productivity and consumption are conserved - everything you consume must first be produced. For you to eat something, someone must first put in the work to produce, harvest, and deliver it to you. For you to receive medical care, someone must first put in the work to create medicines and provide care. For you to receive education, someone must put in the work to teach. If you wish to consume more (i.e. increase your standard of living), then it must be coupled with economic growth (increased productivity). The people producing these things have to produce more of it per year, before you can consume more per year. And likewise you produce more of whatever it is you make per year, so that others can consume more of it. In other words, economic growth == increase in standard of living; and it is impossible for the standard of living to increase without economic growth.

        No, standards of living can shift independently of GDP figures as it has a significant immaterial component.

      • by timeOday ( 582209 ) on Monday February 24, 2020 @03:08PM (#59762088)

        economic growth == increase in standard of living

        There are many problems with that equation.

        1. - Economic growth might be captured by very few people. Marginal increases for them have hardly any utility. And meanwhile benefit the vast majority little if at all. I.e. the production is wasted.
        2. - Any metric of economic growth is incomplete and can/will be gamed. For example we could (did) boost GDP and reduce unemployment by paying each other to watch each others' kids. The gain in underlying productivity is far smaller than the increased number of dollars changing hands.
        3. - Economic growth may come at the cost of other factors that can have a larger impact on standard of living, such as air quality, or the ability to live near and spend time with loved ones.

        It may well be that the way to maximize productivity is for all of us to live as slaves under constant surveillance and the threat of starvation and to simply burn what we produce to ashes to ensure continuing shortages and motivate us to keep it up. So what? Nobody would equate this to any meaningful definition of a good "standard of living."

      • by urusan ( 1755332 )

        The argument here isn't that growth is bad, but rather that the "growth at all costs" mindset sets us up for disaster and is unrealistic.

        Growth can't go on forever, there are limits to growth. Sure, we can increase productivity for a long time (especially considering how wasteful many of our current processes are), but at some point you reach maximum efficiency and maximum exploitation of resources. You also have to start undergoing serious changes to everyone's way of life long before you reach that maximu

    • Maybe this thing will do us all good and let us once again see that a fragile economy that doesn't actually produce anything of value isn't a good thing, no matter what a few bullshit numbers say

      Well then you are holding to false hope. So long as money is so desired, new ways to move money from the poor to the rich will continue to be invented unabated. That desire is something innate to humans and thus what you're asking is for humans to act in a manner that is distinctly non-human. People will never of their own free will ever act in a manner that benefits society as a whole. That is why we invent things to do things opposite of our own human impulses for the good of society. It is also why

      • "That is why we invent things to do things opposite of our own human impulses for the good of society. It is also why we despise those things. "

        Well that explains BT and Piratebay.

      • by Tom ( 822 )

        People will never of their own free will ever act in a manner that benefits society as a whole.

        That is scientifically proven to be untrue. That, right there, is the Chicago School. One of the mantras they have flooded us with is that humans are selfish, when the actual sciences that study humans very clearly demonstrate that that is not the case - but the Chicago type of economics needs the selfish actor as a principle to justify why the economy needs to be built on principles of competition, not cooperation.

        The opposite is true. Humans are incredibly social and altruistic, much more so than most oth

    • believe that growth is the only important thing about an economy, not things like, say, the ability to supply its population with necessities, maintain its infrastructure and provide medical and educational services.

      All of those goodies are a lot easier to achieve in a growing economy.

    • by reanjr ( 588767 )

      I wouldn't call it a a myth. More of a myopic view. Growth is a fundamental requirement of the financial and monetary system we have put in place. It's absolutely a requirement for preserving the current economic system, which would collapse into chaos if growth ever stopped. So growth isn't sufficient for economic prosperity, but it IS necessary.

      • Then we need a new system, one that can handle shrinkage as well as growth gracefully.
    • Meanwhile, students of the Chicago School and other borderline criminal groups of economists with an agenda continue to believe that growth is the only important thing about an economy, not things like, say, the ability to supply its population with necessities, maintain its infrastructure and provide medical and educational services.

      What a bunch of utter nonsense on top of a gross oversimplification. I'd be more worried about the adherents to other schools of economic thought that can't even manage to get the basics right [usatoday.com]. If stock prices matter more to the every day person, it's only because we have our retirement accounts or pension funds invested. The focus on growing economies and rewarding those who are best able to do it over the past several decades is exactly what has enabled so much of the world to be lifted out of poverty. Co

      • by Tom ( 822 )

        If stock prices matter more to the every day person, it's only because we have our retirement accounts or pension funds invested.

        Which didn't happeny by accident buy precisely because it was pushed for. Making the stock market more important to average people was one of those shifts that I am talking about.

        By rational thinking, it is utterly illogical and incredibly stupid. Who in their right mind would invest in something that by nature is chaotic and known to follow boom-bust cycles? There is a good chance that your stock investment will go through at least one bust and either evaporate or considerably increase the amount of money

    • And how do you know all those things? You measure long-term trends in average health, wealth, and longevity.

      Guess what? A free economy is what the doctor ordered. [juliansimon.com]

      Sever yourself from memes that only work in your head, and come on in for the big win of most rapid advancement in these averages.

  • by jellomizer ( 103300 ) on Monday February 24, 2020 @11:57AM (#59761166)

    During the 2008 Great Recession, A lot of safeguards were rolled back, however they were never put back in which puts the economies in a dangerous and vulnerable states, even if they are growing.

    It is like you have a data center, you had an emergency and you needed more storage so you temporary took some of the disk off the RAID array and made them Data. Problem solved we have more storage. However because this was such a cheap fix you boss never ordered all the extra drives to replace the ones you took out of the Raid, and to add additional fail over to the newly commissioned drives.

    Things may work well for weeks months or perhaps years. Then at some point you will get a failure, and the data would be loss without a rollback.

    The low interest rates meant to stimulate the economy, means a lot of companies are borrowing cheap money to grow their businesses. This is good... However too many businesses taking out large loans, and some factor hurts their projection, there will be a lot (and had been a lot) of companies going out of business not because of a bad business plan, but because their plan didn't work as well as it expected.

    More costly loans, means businesses will need to take more careful loans, and for less amounts, so if there was a disruption they are not on the hook for as much money.

  • Sooner or later (Score:5, Interesting)

    by Tablizer ( 95088 ) on Monday February 24, 2020 @11:59AM (#59761178) Journal

    The USA is overdue for a recession, based on historical patterns. It will come eventually, if not now. The current administration should have focused on paying down the deficit instead of tax cuts so that we could have more room for stimuli when the inevitable recession comes.

    I'm for a balanced budget amendment because Washington DC has shown they have no long-term discipline. The amendment should take Keynesian economics into consideration. And it should kick in gradually to avoid shocking the economy.

    • Re:Sooner or later (Score:5, Interesting)

      by MightyMartian ( 840721 ) on Monday February 24, 2020 @12:23PM (#59761310) Journal

      But balanced budget amendments would always have to have their exceptions written into the legislation, in the event of war or other calamity. Such legislation would be worthless. Lawyers and politicians spend a fair portion of their lives figuring out how to work around such laws, and it would be no different here. If you want balanced budgets, then you'd best vote for someone who will move towards it. But here's the first tip. The Republicans won't. The Democrats, ironically enough, are more likely to balance the books, if that's even possible. Here's the reality. The US has carried a debt continuously since the US Civil War. During that period it rose to become the preeminent military and economic power. It built the most powerful military machine on the planet, it took over policing the high seas and guaranteeing trade movement in every international body of water on the planet, it rebuilt Europe and Japan, it put man on the moon, it built the most import communications system since the telegraph. It's universities have pushed out or attracted some of the most brilliant minds the world has ever known. And you know how it did most of that? By selling t-bills. Obviously there's waste, there always is, because humans aren't robots, but even now, even under an administration and congress that seems hopeless at doing anything other than mimicking chimpanzees flinging shit at each other, it still remains the preeminent power, without any meaningful competition. China may be a huge economy, but as this outbreak demonstrates, its economic and political engines are built on sand. Russia is a regional power, certainly capable of threatening its neighbors, but has a woefully inadequate economy that prevents it from even the kind of economic projection the Soviet Union could at times pull off.

    • Overdue? You forgetting about 2008?

    • by bigpat ( 158134 )

      The USA is overdue for a recession, based on historical patterns. It will come eventually, if not now. The current administration should have focused on paying down the deficit instead of tax cuts so that we could have more room for stimuli when the inevitable recession comes.

      I'm for a balanced budget amendment because Washington DC has shown they have no long-term discipline. The amendment should take Keynesian economics into consideration. And it should kick in gradually to avoid shocking the economy.

      The Federal Reserve has a literal infinite capacity to create money. The risk is inflation. We need to get out of the notion that we are ever going to pay back our Federal Debt with taxation or balance the budget under any circumstances while also servicing debt.

      It would be downright unethical and undemocratic to try and force people to pay back decades of spending that they may not have been even alive to vote for. The best thing the Federal Reserve could start doing is to pay back debt from its account

      • by guruevi ( 827432 )

        The only way for the Fed to create money is for the country to grow its value. If you stimulate businesses (through tax cuts etc) your GDP grows and your percentage of debt reduces. A balanced budget would be useful, but since neither party has indicated any willingness to touch entitlements, you probably will only get some shavings on the budget left and right.

    • The current administration should have focused on paying down the deficit instead of tax cuts

      Exactly this. The tax cuts failed in terms of the deficit, the massive growth that was supposed to happen, didn't. The deficit has increased massively under this administration. I hate that the Orange Guy has usurped the Republican party. It's not like Democrats will fair any better, but now that Trump has reshaped the GOP, there's not really anyone in any serious position of power who is sitting there advocating for "HOLY FUCKING SHIT PEOPLE! THIS SHIT IS OUT OF CONTROL!" like they should be doing. T

      • by guruevi ( 827432 )

        The growth did happen. You have massive investment in business, extremely low unemployment numbers but you can verify those yourself.

        The deficit hasn't grown as a percentage of GDP, it has either flattened or dipped slightly to ~2-3% and this is just recovering from the previous administration that brought spending to 10% in the first term.

        • The deficit hasn't grown as a percentage of GDP, it has either flattened or dipped slightly to ~2-3% and this is just recovering from the previous administration that brought spending to 10% in the first term.

          I think you must have been bamboozled into looking at a few carefully selected data points to reach those conclusions, they don't match the data at all:

          https://www.forbes.com/sites/c... [forbes.com]

    • Until there's a constitutional amendment restricting government spending as a % of GDP or some (perhaps better) measure of the economy, there will be no way to stop the current trend. The citizens have found out that they can vote themselves bread and circuses and everyone has become convinced that as long as they get to decide which bread and circuses its spent on we won't ever stop this madness.
    • The USA is overdue for a recession, based on historical patterns. It will come eventually, if not now. The current administration should have focused on paying down the deficit instead of tax cuts so that we could have more room for stimuli when the inevitable recession comes.

      I'm for a balanced budget amendment because Washington DC has shown they have no long-term discipline. The amendment should take Keynesian economics into consideration. And it should kick in gradually to avoid shocking the economy.

      The last time people were serious about fiscal discipline was the Republican Contract With America back in the 90s. Fiscal discipline was dropped with GW Bush and was never revived. It would need bi-partisan support to succeed in the long run. Based on the current thinking about free college / tax cuts / universal medical care / open borders (or close approximations like no penalty illegal immigration) I doubt fiscal sanity is on the horizon. Let me be clear - both parties are to blame for this.

  • Coronavirus will further negative sentiments towards pessimism. Next question how long slump likely to last?
  • by MetricT ( 128876 ) on Monday February 24, 2020 @12:40PM (#59761406)

    The economy currently has an asset bubble, similar to the ones that caused the Dot.Com recession in 2001 and the Great Recession in 2008. Except the current bubble is larger in real terms than the one in 2008.

    https://i.imgur.com/GVgzPF7.pn... [imgur.com]

    The fundamental problem is that for 25 years, government has using loose money policies and deficit spending to paper over shortfalls in economic growth. And it looks like we're approaching the endgame. The bubble is bigger this time, but government's response is much more constrained. The Fed can't drop rates by ~5% like they usually due as rates are already 1.5-1.75%. Unconventional monetary policy fuels inequality and makes the next recession bigger. And fiscal stimulus is likely to be constrained due to record government deficits as well as increased partisanship in Congress.

    And like Twain said, history doesn't repeat itself but it does rhyme. In 2008, we had a financial crises because banks didn't trust the mortgage-backed securities they were lending as collateral. Today, the repo market is having a similar crises because banks don't trust the collateral that they are using for overnight loans.

  • by EzInKy ( 115248 ) on Monday February 24, 2020 @02:09PM (#59761812)

    My retirement strategy depends on collecting dividends for steady income. I usually keep 20% cash to take advantage of moments like today. Lower prices mean higher yields.

"The whole problem with the world is that fools and fanatics are always so certain of themselves, but wiser people so full of doubts." -- Bertrand Russell

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